Medicare Physician Payment Cut – Congress Considering a 3-Year Fix

A 21.3% Medicare physician payment cut takes effect on June 1, unless Congress comes up with a solution. ACOG, the AMA, and other medical groups are pushing for a permanent fix through repeal of the flawed SGR formula for setting payment rates. But Members of Congress, many of them squeamish about increasing the federal deficit in an election year, are looking at shorter-term alternatives. This week, Congress takes up a compromise fix:

A three-year fix to payment rates. House and Senate Democratic Leaders agreed to include certain “extenders” in a tax bill, the American Jobs and Closing Tax Loopholes Act of 2010, H.R. 4213. This compromise would avoid the 21.3% physician payment cut set to kick in on June 1 and instead give doctors a 1.3% boost through the end of the year. Physicians would then get an additional 1% increase in 2011. The fix would offer additional increases in 2012 and 2013, based on the growth in Medicare health spending. This growth would be measured by the target growth rate formula in H.R. 3961, legislation passed by the House in 2009. The new legislation guarantees that physicians cannot see a cut in years 2012 and 2013. Primary care doctors would see higher payment boosts.

A major drawback to this compromise fix: in 2014 and beyond, the physician payment system would revert back to current law under the SGR formula, resulting in physician pay cuts as high as 37%.

Had Congress permanently solved the payment problem 4 years ago at a cost of $49 billion, it would have cost less than shorter-term remedies now under consideration. Last week, the Congressional Budget Office and the staff of the Joint Committee on Taxation issued this estimate that the net cost of the 3-year fix under H.R. 4213 would be $64.6 billion over the years 2010-2015.

The House Rules Committee is expected to take up these provisions this week, with Senate consideration to follow the House vote.

Should the 3-year fix not pass, Congress could consider other measures:

A five-year, $88.5 billion plan giving physicians scheduled pay increases. This was popular among some House Democrats but may be less so among moderate Representatives and Senators due to cost.

A delay of the 21.3% cut until the end of the year.

A one-month delay in the cuts. Congress approved a similar short-term fix in April.